India steel composite index drops as inventory levels continue to rise

• Long steel prices drop on inventory pressure
  
  
• High import volumes, dull export scenario weigh on flats
  
  
• Infra, construction demand to edge higher from Jan'24 onwards
  
  
• Export prospects may improve on EU restocking
  
  

SteelMint's weekly India Steel Composite Index, a barometer of the domestic steel market, dropped 0.7% w-o-w to 142.5 points from 143.4 last week indicating an overall softening of steel prices in the country.

The flat steel composite index fell by a modest 0.1% to 148.7 points, but the long steel index dropped 1.2% w-o-w, data show.

What's impacting longs prices?

Rebar prices under pressure: Trade-level prices of BF-route rebar (12-32mm, Fe500D) dropped by INR 500/t w-o-w to INR 53,300/t ($641/t) exy Mumbai, as per SteelMint's assessment on 22 December. Prices are minus GST at 18%. Likewise, IF rebar prices have fallen INR 600/t w-o-w to INR 48,700/t ($586/t) exw Mumai, as assessed on 22 December. Buyers are wary due to the consistent decline in prices, the widening gap between BF/IF prices, and are engaged in need-based purchases.

Rising inventories: Inventories in the system have risen on sluggish trade-level demand amid pollution concerns and temporary restrictions on construction activity in north India. MoRTH data also show a minor contraction in national highway construction in December. However, the fundamentals remain strong.

Factors affecting flats prices

Oversupply concerns: HRC and CRC trade prices have edged down by INR 300-400/t on weak market sentiment, fuelled by subdued trading, import pressure, and cheaper domestic alternatives. Domestic HRC supplies have increased with new integrated mills commencing supplies and rapid inflow of imports. This has put pressure on profitability, making market participants cautious and driving prices downward.

Imports still a bother: Bulk imports of HRC and plates reached 486,383 t in December (provisional), as per the vessel line-up data with SteelMint. Imports were around 1.08 mnt in November and 584,999 t in October. Imports have been higher than usual due to price viability. Current inflows are of previous bookings and are expected to slow down going ahead. However, large import volumes are still pressuring domestic prices.

Export prices fall: Indian mills' HRC export prices to the European Union (EU) declined by $10/t w-o-w to around $695/t CFR Antwerp. Export deals of around 15,000 t were concluded. Mills continue to keep HRC export offers on hold for Southeast Asia and the Middle East (ME), as realisations are lower and Chinese prices are competitive. A dull export scenario is certainly not offering support to prices.

Outlook

Long steel prices are expected to improve as real estate and urban infrastructure construction gather pace from January onwards ahead of the approaching General Elections next year. While the order book is robust, less volatility in raw material prices and increased liquidity are likely to boost construction activity, as well as general infra such as road and highway construction.

On the other hand, top Asian mills such as China's Baowu and Vietnamese major Formosa have raised HRC prices. Chinese steel exports may not increase beyond the roughly 7-8 mnt/month levels if stimulus effect boosts domestic demand in China. This is expected to be positive for steel prices globally.

Further, restocking is expected to start in the EU post New Year holidays on low inventories. This is surely positive for export prospects and prices, and is likely to have a positive impact on domestic flat steel prices, too.

2nd India Steel and Metal Conference: Keeping above dynamics in mind, SteelMint, along with the Steel Users Federation of India, will be organizing the 2nd India Steel and Metal Conference: Supply Chain & Sourcing Strategies, over 10-11 January, 2024 in Mumbai. Several key sessions will explore the current challenges and enablers. Experts will also try to read future trends.

This is the only conference focusing on steel end-user industries and their issues. It will be followed by the glittering SUFI Steel Awards, 2023. Register fast.